TAHNEE HEIGHT CO-OP HSG. SOCIETY LTD, MUMBAI v. ITO 16(2)(4), MUMBAI

ITA 1786/MUM/2009 | 2005-2006
Pronouncement Date: 15-07-2011 | Result: Allowed

Appeal Details

RSA Number 178619914 RSA 2009
Assessee PAN AABFT7409D
Bench Mumbai
Appeal Number ITA 1786/MUM/2009
Duration Of Justice 2 year(s) 3 month(s) 27 day(s)
Appellant TAHNEE HEIGHT CO-OP HSG. SOCIETY LTD, MUMBAI
Respondent ITO 16(2)(4), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 15-07-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted E
Tribunal Order Date 15-07-2011
Date Of Final Hearing 02-06-2011
Next Hearing Date 02-06-2011
Assessment Year 2005-2006
Appeal Filed On 19-03-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E MUMBAI BEFORE SHRI P.M. JAGTAP A.M. AND SHRI V. DURGA RAO J.M. ITA NO. 1786/MUM/2009 ASSESSMENT YEAR: 2005-06 TAHNEE HEIGHT CO-OP. HOUSING SOCIETY LTD. . APP ELLANT PETIT HALL D BUILDING 66 NAPEANSEA ROAD MUMBAI 400 006. (PAN AABFT7409D) VS. INCOME-TAX OFFICER-16(2)(4) RESPONDENT MUMBAI. ITA NO. 2728/MUM/2009 ASSESSMENT YEAR: 2005-06 INCOME-TAX OFFICER-16(2)(4) APPELLANT MUMBAI. VS. TAHNEE HEIGHT CO-OP. HOUSING SOCIETY LTD. . RES PONDENT PETIT HALL D BUILDING 66 NAPEANSEA ROAD MUMBAI 400 006. (PAN AABFT7409D) ASSESSEE BY : MR. VIJAY MEHTA REVENUE BY : MR. G.P. TRIVEDI ORDER PER V. DURGA RAO J.M.: THESE ARE THE CROSS APPEALS DIRECTED AGAINST THE O RDER OF CIT(A)- XVI MUMBAI PASSED ON 29/01/2009 FOR THE ASSESSMEN T YEAR 2005- 06. ITA NOS. 1786 & 2728/M/2010 TAHNEE HEIGHT CO-OP HSG. SOCIETY LTD. 2 ITA NO. 1786/MUM/09 APPEAL BY THE ASSESSEE 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUND OF APPEAL:- THE CIT(A) ERRED IN CONFIRMING THE ADDITION MADE B Y THE AO BEING CONTRIBUTION OF RS. 81 47 200/- RECEIVED BY T HE APPELLANT FROM ITS MEMBERS TOWARDS MAJOR REPAIR WORK; AS TAXA BLE IN THE HANDS OF THE APPELLANT. THE APPELLANT SUBMITS THAT IT BEING A MEMBER SOCIET Y GOVERNED BY PRINCIPLE OF MUTUALITY CONTRIBUTION/RECEIPT FROM IT S MEMBERS CANNOT BE TAXED AS INCOME LIABLE TO TAX. 3. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT AS SESSEE COLLECTED AN AMOUNT OF RS. 1 90 000/- FOR TRANSFER FEE ON SALE O F FLATS AS WELL AS PARKING LOT DURING THE YEAR AND IN ADDITION TO THE TRANSFER PREMIUM THE SOCIETY HAD ALSO RECEIVED AN AMOUNT OF RS. 81 4 7 200/- FROM THE SAME MEMBERS WHO TRANSFERRED THE FLATS. THE ASSESSE E INSTEAD OF SHOWING THE SAID AMOUNT OF RS. 81 47 200 AS INCOME CREDITED TO THE MAJOR REPAIR WORK ACCOUNT. THE AO FELT THAT THIS W AS AN ATTEMPT BY THE ASSESSEE TO CIRCUMVENT THE PROVISIONS OF THE MA HARASHTRA CO-OP. SOCIETIES ACT 1960. THE A O NOTED THAT THE CO-OP. AND THE TEXTILE DEPARTMENT OF THE GOVT. OF MAHARASHTRA HAD ISSUED A CIRCULAR NO. CHS-2001/M/NO.188/14-C DATED 09/08/2001 ACCORDING T O WHICH ON TRANSFER OF A FLAT/TENEMENT BY A MEMBER OF CO-OP HO USING SOCIETY THE RATE OF PREMIUM TO BE CHARGED SHOULD BE FIXED IN A GENERAL BODY MEETING OF THE CONCERNED SOCIETY. HOWEVER THE RA TE OF PREMIUM SHOULD NOT EXCEED RS. 25 000/- IN EACH CASE IN RESP ECT OF MUNICIPAL CORPORATION AND AUTHORITY AREA. THIS STEP WAS TAKEN TO CURTAIL THE PROFIT EARNING MOTIVE OF THE CO-OP. HOUSING SOCIET IES. THE AO FURTHER NOTED THAT THE ASSESSEE IN VIEW OF THIS DIRECTIVE C OULD NOT HAVE CHARGED MORE THAN AN AMOUNT OF RS. 25 000/- PER TRA NSFER BUT IT HAD COLLECTED MUCH IN EXCESS. IT WAS NOTED THAT INS TEAD OF SHOWING IT AS A TRANSFER PREMIUM IT HAD ACCOUNTED THE RECEIPTS AS CONTRIBUTION TO THE MAJOR REPAIR FUND ACCOUNT. IN VIEW OF THE PR OFIT EARNING MOTIVE SHOWN BY THE ASSESSEE THE AO CONCLUDED THAT THE AS SESSEE HAD ITA NOS. 1786 & 2728/M/2010 TAHNEE HEIGHT CO-OP HSG. SOCIETY LTD. 3 VIOLATED THE PRINCIPLES OF MUTUALITY THEREFORE HE BROUGHT THE AMOUNT OF RS. 83 37 200/- (RS. 81 47 200/- + RS. 1 90 000/ -) TO TAX. AGGRIEVED BY THE ORDER OF AO THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). 4. BEFORE THE CIT(A) THE ASSESSEE STATED THAT THE CONTRIBUTIONS ON TRANSFER OF FLATS HAD BEEN RECEIVED FROM MEMBERS TO WARDS MEETING EXPENSES INCLUDING FOR REPAIRS PROPERTY TAX MAINTE NANCE ETC. THE CONTRIBUTION RECEIVED FROM MEMBERS WERE CLAIMED AS EXEMPT ON THE GROUND OF MUTUALITY AS THERE IS A COMPLETE IDENTITY OF PERSONS CONTRIBUTING AND THE BENEFICIARIES. HE FURTHER STAT ED THAT THE ASSESSEE DID NOT CARRY ON ANY COMMERCIAL ACTIVITY FOR EARNIN G PROFIT AS SUCH AND IT WAS STRICTLY ADHERED TO THE PRINCIPLES OF MU TUALITY AS IT RECEIVED CONTRIBUTION FROM MEMBERS AND UTILIZED THE SAME FOR THE BENEFIT OF MEMBERS. AFTER CONSIDERING THE SUBMISSIO NS OF THE ASESSSEE THE CIT(A) UPHELD THE ADDITION OF RS. 81 47 200/- MADE BY THE AO FOLLOWING THE SPECIAL BENCH DECISION OF THE ITAT MUMBAI IN THE CASE OF WALKESHWAR TRIVENI HOUSING SOCIETY LTD. VS. ITO 88 ITD 159. HOWEVER HE DELETED THE ADDITION OF RS. 1 90 0 00/- COLLECTED BY THE ASSESSEE ON ACCOUNT OF TRANSFER PREMIUM. STILL AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE THE ITAT. 5. BEFORE US THE LEARNED COUNSEL FOR THE HAS CANVA SSED THAT THE ISSUE UNDER CONSIDERATION IS COVERED BY THE DECISIO N OF THE ITAT IN ASSESSEES OWN CASE FOR AY 2006-07 VIDE ITA NOS. 52 75/MUM/09 (ASSESSEES APPEAL) & 5948/MUM/09 (REVENUES APPEAL ) ORDER DATED 13 TH MAY 2011. A COPY OF THE SAID ORDER HAS BEEN FILED ON RECORD. THE LEARNED DR ON THE OTHER HAND DID NOT OBJECT TO THE SUBMISSIONS MADE BY THE LEARNED COUNSEL FOR THE ASSESSEE. 6. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF THE PARTIES AND PERUSED THE RECORD AS WELL AS GONE THROUGH THE ORDE RS OF THE AUTHORITIES BELOW. WE FIND THAT THE ITAT IN ASSESSE ES OWN CASE FOR AY ITA NOS. 1786 & 2728/M/2010 TAHNEE HEIGHT CO-OP HSG. SOCIETY LTD. 4 2006-07 (SUPRA) DELETED THE ADDITION MADE BY THE AO ON ACCOUNT OF TRANSFER FEE BY OBSERVING AS UNDER:- 6. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES A ND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THA T THE SOLITARY ISSUE RAISED IN THE ASSESSEES APPEAL RELATING TO TAXABILITY OF TRANSFER CHARGES IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE V ARIOUS DECISIONS OF THE TRIBUNAL AS WELL AS THAT OF THE HONBLE BOMBAY HIGH COURT. IN ONE OF SUCH CASES NAMELY SIND CO-OPERATIVE HOUSING SOCIETY VS . ITO 317 ITR 47 THE HONBLE BOMBAY HIGH COURT HAS DECIDED A SIMILAR ISS UE IN FAVOUR OF THE ASSESSEE AND THE RELEVANT OBSERVATIONS RECORDED BY THEIR LORDSHIPS IN THIS CONTEXT ARE EXTRACTED BELOW : WHETHER THE FEE WAS VOLUNTARY OR NOT WOULD MAKE NO DIFFERENCE TO THE PRINCIPLE OF MUTUALITY. PAYMENTS WERE MADE UNDER TH E BYE-LAWS OF THE ASSESSEE WHICH CONSTITUTED A CONTRACT BETWEEN THE A SSESSEE AND ITS MEMBERS WHICH WAS VOLUNTARILY ENTERED INTO AND VOLU NTARILY CONDUCTED AS A MATTER OF CONVENIENCE AND DISCIPLINE FOR RUNNING OF THE ASSESSEE-SOCIETY. IF ANY AMOUNT WAS RECEIVED MORE THAN WAS CHARGEABLE UNDER THE BYE-LAWS OR THE GOVERNMENT NOTIFICATION THE ASSESSEE WAS BO UND TO REPAY THE AMOUNT AND IF IT RETAINED THE AMOUNT IT WOULD BE IN THE NATURE OF PROFIT MAKING THAT SPECIFIC AMOUNT EXIGIBLE TO TAX. UNDER THE BYE-LAWS CHARGING OF TRANSFER FEES HAD NO ELEMENT OF TRADING OR COMME RCIALITY. SINCE THERE WAS NO TAINT OF COMMERCIALITY THE QUESTION OF EARNI NG PROFITS WOULD NOT ARISE WHEN THE ASSESSEE FROM THE FUNDS RECEIVED APP LIED THE MONEYS RECEIVED TOWARDS THE MAINTENANCE OF THE SOCIETY AND PROVIDING THE MEMBERS WITH USUAL PRIVILEGES ADVANTAGES AND CONVE NIENCES. THUS THE PRINCIPLE OF MUTUALITY WAS APPLICABLE TO THE ASSESS EE WHICH HAD AS ITS PREDOMINANT ACTIVITY THE MAINTENANCE OF THE PROPE RTY OF THE SOCIETY WHICH INCLUDED ITS BUILDING(S) AND AS LONG AS THERE WAS N O TAINT OF COMMERCIALITY TRADE OR BUSINESS THE RECEIPT OF TRANSFER FEES WAS NOT LIABLE TO TAX. RESPECTFULLY FOLLOWING THE AFORESAID DECISION OF TH E HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF SIND CO-OP. HOUSING SOCIE TY (SUPRA) WE DELETE THE ADDITION MADE BY THE AO AND SUSTAINED BY THE LE ARNED CIT(APPEALS) ON ACCOUNT OF TRANSFER FEES AND ALLOW THE APPEAL OF THE ASSESSEE. 7. SINCE THE ISSUE UNDER CONSIDERATION IS MATERIALL Y IDENTICAL TO THAT OF AY 2006-07 WE RESPECTFULLY FOLLOW THE DECI SION OF THE ITAT IN THAT YEAR AND IN THE LIGHT OF THAT WE DELETE THE AD DITION OF RS. 81 47 200/- MADE BY THE AO ON ACCOUNT OF TRANSFER F EE. ACCORDINGLY THIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. ITA NOS. 1786 & 2728/M/2010 TAHNEE HEIGHT CO-OP HSG. SOCIETY LTD. 5 ITA NO. 2728/MUM/09 APPEAL BY THE REVENUE 8. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE CIT(A) IS JUSTIFIED IN HOLDING THAT THE PRINCIPLE OF MUTUALITY IS APPLICABLE TO THE SURPLUS AMOUNT RECEI VED AS TRANSFER CHARGES IN EXCESS OF LIMIT PRESCRIBED UNDE R LAW. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE CIT(A) IS JUSTIFIED IN HOLDING THAT THE PRINCIPLE OF MUTUALITY IS APPLICABLE TO THE AMOUNT RECEIVED BY W AY OF NON- OCCUPANCY CHARGES FROM MEMBERS OF THE SOCIETY. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE AO RESTORED. 9. THE AO ADDED THIS AMOUNT OF RS. 34 16 377/- BEIN G NON OCCUPANCY CHARGES BY THE SOCIETY FROM ITS MEMBERS T O THE INCOME RETURNED FOR THE REASON THAT THE ASSESSEE DID NOT P RODUCE THE LEAVE AND LICENSE AGREEMENT ENTERED INTO BY THE MEMBERS W HO HAVE RENTED THEIR FLATS AND ALSO THE MINUTES OF THE MEETINGS IN WHICH THE NON- OCCUPANCY CHARGES WERE FIXED BY THE MEMBERS OF THE SOCIETY. ON APPEAL THE CIT(A) DELETED THE SAID ADDITION BY HO LDING THAT THE PRINCIPLE OF MUTUALITY WOULD APPLY TO THE COLLECTIO NS MADE FROM MEMBERS AS NON-OCCUPANCY CHARGES AS THE SAME HAS BE EN COLLECTED FROM MEMBERS AND ON THE BASIS OF THE DECISION TAKEN AT THE MEETING OF THE MANAGEMENT COMMITTEE. AGGRIEVED THE REVENUE IS IN APPEAL BEFORE THE ITAT. 10. THE LEARNED REPRESENTATIVES OF THE PARTIES AGRE ED THAT THIS ISSUE IS COVERED BY THE DECISION OF ITAT IN ASSESSEES OW N CASE FOR AY 2006- 07 (SUPRA) WHEREIN THE ITAT HELD AS UNDER:- 7. AS REGARDS THE APPEAL OF THE REVENUE IT IS OBS ERVED THAT THE SOLITARY ISSUE INVOLVED THEREIN RELATING TO TAXABIL ITY OF NON-OCCUPANCY CHARGES RECEIVED BY THE ASSESSEE IS ALSO SQUARELY C OVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF HONBLE BOMBAY HIGH COU RT IN THE CASE OF MITTAL COURT PREMISES CO-OP. SOCIETY LTD. 320 ITR 4 14 WHEREIN IT WAS HELD THAT THE OBJECT OF NON-OCCUPANCY CHARGES COLLECTED BY THE ASSESSEE SOCIETY FROM ITS MEMBERS AS PER BYE-LAWS WAS TO INCREASE IT S FUNDS WHICH COULD BE UTILIZED TO PROVIDE SERVICES AMENITIES AND FACI LITIES TO ITS MEMBERS. IT ITA NOS. 1786 & 2728/M/2010 TAHNEE HEIGHT CO-OP HSG. SOCIETY LTD. 6 WAS HELD THAT THE PRINCIPLE OF MUTUALITY THEREFORE WAS APPLICABLE TO THE NON-OCCUPANCY CHARGES AND THE SAME WERE NOT TAXABLE IN THE HANDS OF THE ASSESSEE-SOCIETY. RESPECTFULLY FOLLOWING THE SAID D ECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF MITTAL COURT PREMI SES CO.-OP. SOCIETY LTD. (SUPR) WE UPHOLD THE IMPUGNED ORDER OF THE LE ARNED CIT(APPEALS) DELETING THE ADDITION MADE BY THE AO ON ACCOUNT OF NON-OCCUPANCY CHARGES AND DISMISS THE APPEAL OF THE REVENUE. 11. SINCE THE ISSUE IS IDENTICAL TO THAT OF AY 2006 -07 WE RESPECTFULLY FOLLOW THE DECISION OF THE ITAT IN THA T YEAR AND IN THE LIGHT OF THAT WE UPHOLD THE ORDER OF CIT(A) IN DELE TING THE ADDITION OF RS. 34 16 377/- MADE BY THE AO ON ACCOUNT OF NON-OC CUPANCY CHARGES. ACCORDINGLY THIS GROUND OF APPEAL OF THE R EVENUE IS DISMISSED. 12. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWE D AND THE APPEAL OF THE REVENUE IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS 15 TH DAY OF JULY 2011. SD/- SD/- (P.M. JAGTAP) (V. DURG A RAO) ACCOUNTANT MEMBER JUDI CIAL MEMBER MUMBAI DATED: 15 TH JULY 2011 KV COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) CONCERNED. 4) THE CIT CONCERNED. 5) THE DEPARTMENTAL REPRESENTATIVE E BENCH I.T .A.T. MUMBAI. BY ORDER //TRUE COPY// ASST. REGISTRAR I.T.A.T. MUMBAI. ITA NOS. 1786 & 2728/M/2010 TAHNEE HEIGHT CO-OP HSG. SOCIETY LTD. 7 S.NO. DESCRIPTION DATE INTLS 1. DRAFT DICTATED ON 20/06/11 SR.P.S./P.S 2. DRAFT PLACED BEFORE AUTHOR 23/06/11 SR.P.S/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.P.S./PS SR.P.S./P.S 6. KEPT FOR PRONOUNCEMENT ON SR. P.S./P.S. 7. FILE SENT TO THE BENCH CLERK SR.P.S./P.S 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER